ERP System Installation & Implementation

ERP Implementation Project

It is a special IS Project If vendor system
Much less system design than otherwise Vendor software already programmed
Only need interfaces

Have help from vendor, consultants Opportunities to outsource

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Relative Use of ERP Implementation Strategies

Mabert et al. [2000]

Strategy
Single vendor package-internal modifications Single vendor package Vendor packages-internal modifications Best-of-Breed In-house plus special packages Total in-house development

%
50 40 5 4 1 0.5
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ERP as an IS Project
At least 7 optional ways to implement ERP Outsourcing (ASP) the easiest
But risky

Next easiest is single vendor source without modifications

Not necessarily least expensive, nor greatest benefits

All others involve significant IS project

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Implementation Strategy Use

Dominant strategy in manufacturing:
Single vendor Over half added internal modifications

Very few best-of-breed Almost none developed totally in-house

IS/IT Project Management Results

Conventional IS/IT projects have trouble with time, budget, functionality ERP projects have slightly more structure, but still face problems
Underestimation of required time is common Vendors have made easier & faster Enhancement of systems another trend
Reintroduces time problem
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System Analysis & Design

Waterfall model
Basic standard for software development

Prototyping
Good for development when final design not clear

Spiral model
Intended to reduce project development risk Cyclical prototyping and testing

Rapid Prototyping
Use feedback from users in compressed development
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Application Service Providers

Outsource ERP Popular
Unocal pared IT staff 40% in two years Focus on core competencies, shed cost centers

Many specific functions can be outsourced Outsourcing benefits

Speed Organization lacks IT skills

ASP the most popular way to outsource

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ASP Risks
Your applications and data are controlled by others Service failures out of your control Confidentiality failure a possibility Performance issues possible

Relative Implementation Effort

Method In-House Vendor
Heavy Heavy

Consultant
Heavy Heavy +

Single vendor package-internal Significant modifications Single vendor package Vendor packages-internal modifications Best-of-Breed Significant+ Significant+

Moderate Heavy +

Significant ++ Moderate Heavy + None Maybe

In-house plus special packages Excruciating Total in-house development Application Service Provider Painful Light

Moderate Maybe None To select

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Implementation Effort
Implementing ERP places strain on inhouse information systems groups Consultants are expensive
Sometimes need special expertise

Tradeoff: control vs. time & cost

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Implementation Life Cycle

Phases of ERP Implementation
Pre Evaluation Screening Package Evaluation Project Planning Phase Gap Analysis Implementation Training

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Implementation Life Cycle

Phases of ERP Implementation (Contd.)
Testing Going Live End User Training Post Implementation

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Pre Evaluation Screening

Hundreds of ERP Vendors Limit the No. of packages to be evaluated to less than five Thorough evaluation of a small no. of packages No superficial analysis of dozens of packages
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Pre Evaluation Screening (Contd.)

Zero in on a few best packages by
Looking at product Literature Getting help from External Consultants Package used by similar companies

Vendors standing in the Market Local Implementation and post Implementation support
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Package Evaluation
Do it right the first time
Huge Investment Not easy to switch to another one, once purchased one package A very little room for error

None of them are perfect Objective should be to find the best fit Develop selection criteria
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Package Evaluation (Contd.)

Functional fit Integration between various modules Flexibility & Scalability Complexity User friendliness Quick implementation Support Multi Sites
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Package Evaluation (Contd.)

Technology
Client / Sever capabilities Database Independence Security

Availability of regular upgrades Amount of customization required Local support infrastructure

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Package Evaluation (Contd.)

Availability of reference sites Total costs
Cost of licenses Cost of Training Cost of Implementation Customization cost Hardware cost Maintenance cost
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Package Evaluation (Contd.)

Form a selection / evaluation committee
People from various departments ( Functional Experts ) Top Management ( CIO, COO etc.) Consultants ( Package Experts ) Package selected by the committee will have company wide acceptance

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Project Planning Phase

Time Schedules Deadlines Development of Project Plan Roles & Responsibilities Project Manager selection & appointment Selection of Implementation Team Members
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Project Planning Phase (Contd.)

Task allocation amongst team members When to begin the project, how to do it & when it is supposed to be completed Contingency plan How to Monitor the progress Control measures to be taken Corrective action plan, in case something goes wrong
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Project Planning Phase (Contd.)

Implementation Team will meet periodically Review the progress Chart the future course of action

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GAP Analysis
Best Fit
Meets 80% of Functional Requirements

Solutions for the GAP

Alter business processes to fit the package Pinning hopes on Upgrades Third party Interface Write additional programs Altering ERP Source Code ( Most expensive )
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Implementation Team Training

How to Implement the package Running the system Consultants will Implement at the first site Selection of the employees for training
People with the right attitude People who are willing to change, learn new things, have good functional knowledge and are not afraid of technology
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Testing
Test for extreme case scenarios
System Overloads Multiple users logging on at the same time with the same query User entering invalid data Hackers trying to access restricted areas

Design the test cases to find

Weak links in the system
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End User Training

Actual user will be given training on how to use the system This should be done before going Live Identify the employees the users of the new system There will be resistance to change Most Implementations fail because of lack of user training
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Going Live
Data conversion Databases should be up & running Prototype should be fully configured & tested & should be ready to go operational New system is Live when the old system is removed & only new system is used for doing business
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Definition & Measurement of Success

Success depends on the Point of View
Point of view of Project Managers & Consultants Completion on time & within Budget Adopters view Smooth transition to stable operations with the new system, Achieving intended business improvements like Inventory Reductions, gaining improved decision support capabilities etc.

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Definition & Measurement of Success

Second issue is timings of Measurement
Success in the short run & long run Instances when Successfully installed ERP systems were terminated when the companies were merged with another Successes measured at three different points in time in ERP experience cycle Three distinct phases
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Definition & Measurement of Success

Project Phase
During this phase ERP software is configured & rolled out

Shake down Phase

During this phase the company makes transition from Go Live to Normal Operations

Onward & Upward Phase

During this Phase the company captures the majority of benefits from ERP & plans for next steps for technology implementation & business improvements
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Definition & Measurement of Success

Success Metrics for different Phases
Project Phase
Project Cost Vs. Budget Project completion in time relative to schedule Completed & installed system functionality relative to the scope

Shakedown Phase
Short term changes occurring after system Go Live
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Definition & Measurement of Success

Success Metrics for different Phases
Shakedown Phase
Length of time before KPI achieve Normal or Expected Levels Short term impact on Organizations adopters, suppliers and customers such as average time on hold when placing a telephone order

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Definition & Measurement of Success

Success Metrics for different Phases
Onward & Upward Phase
Achievement of Business results such as reduced operational cost, reduced inventory carrying costs On going improvements in business results Ease in adopting new ERP releases, other new technologies, improved business practices, improved decision making etc. after ERP system has achieved stable operations
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Implementation
Failures reasons
Choosing a wrong product Incompetent & haphazard implementation Inefficient & ineffective usage

What is required for Successful Implementation

Good people who know the business Good vendor
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Implementation (Contd.)
What is required for Successful Implementation
Good Product Good Consultant Well planned implementation Perfect execution End user training
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Implementation (Contd.)
Questions & Concerns
Should we buy an ERP package or no If yes, which one What are the hidden costs How does one implement What problems are likely to crop up Obstacles & Hurdles Who should be involved in Implementation
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Implementation (Contd.)
Questions & Concerns (Contd.)
What is the role of the consultant in Implementation How does one overcome the employee resistance When will the benefits start showing up

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Implementation (Contd.)
Obstacles
ERP system should have support & cooperation of all the users Without their support, chances of failures are high Strong commitment & support from top management Change on a massive scale
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Implementation (Contd.)
Obstacles (Contd.)
Fear of losing jobs People will be afraid of training & new learning Job profiles will change Job responsibilities will undergo drastic alterations ERP will eliminate many existing jobs, but will also create new jobs with new responsibilities
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Adopters problems with ERP

Project Phase Problems
Software Modifications
Strongly recommended to avoid modifying the software & live with existing functionality Difficulty in getting modifications to work well Getting well tested & working modifications in a timely manner is a problem When the user understands the software better, they discover ways to implement needed capabilities without modifications
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Adopters problems with ERP

Project Phase Problems
Even though ERP systems are said to be comprehensive, need for retaining some legacy systems & third party specialized software cannot be totally ruled out Interfacing these systems with ERP is both challenging & expensive

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Adopters problems with ERP

Project Phase Problems
Problems with product & implementation consultants
Coordinating the efforts of various consultants is a challenge ( H/W Vendor, Software Vendor, telecom Vendor, ERP Vendor, Implementation Consultant )

Turnover of Project Personnel

Losing key IT specialists & user representatives working on the project while the project is going on
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Adopters problems with ERP

Project Phase Problems
Turnover of Project Personnel
Losing experienced people after the project is complete

Shakedown Phase Problems

Companies experienced negative outcomes during this phase
ERP system performance problems Data entry errors
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Adopters problems with ERP

Shakedown Phase Problems
Companies experienced negative outcomes during this phase
Increased staffing required to cope with slowdown & errors Negative impact on customers & suppliers from an inability to answer their queries & delayed shipments Inadequate management reporting
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Adopters problems with ERP

Shakedown Phase Problems
These were caused by problems occurred during Project Phase which were not recognized as problems or were not resolved when occurred The most important problems that occurred during Project Phase were
Inappropriately cutting project scope when there are missing key milestones
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Adopters problems with ERP

Shakedown Phase Problems
Cutting end user training
Underestimating the need for training

Inadequate Testing
Testing of cross module integration Testing of interfaces with legacy systems Testing of modifications carried out by external vendors Testing unusual business scenarios
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Adopters problems with ERP

Shakedown Phase Problems
Underestimating data quality problems & reporting needs
Retaining legacy data for many years ( Regulatory compliance & Product servicing for many years ) In integrated ERP systems, data must be clean Users will be disappointed if their reporting needs are not met

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Adopters problems with ERP

Shakedown Phase Problems
Reveals unresolved or unrecognized problems of Project Phase Many of these problems can be avoided by giving adequate attention during Project Phase to :
Cross functional configuration & testing of software End user training Data conversion & management of legacy data
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Adopters problems with ERP

Shakedown Phase Problems
Reporting needs Scenarios for recovering from data input errors

Onward & Upward phase problems

Fragile human capital
Losing ERP knowledgeable IT specialists & end users Difficulty replacing them
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Adopters problems with ERP

Onward & Upward phase problems
Migration Problems
Software modifications made earlier convert poorly during implementation of later releases Some organizations vowed never again to modify ERP software but to make necessary changes to their business processes

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Motivations for ERP

Most common reasons
Infrastructure
Common Platform, Y2K Compliance, replacing aging IT Infrastructure, High support costs for legacy systems

Capability
Process improvements such as Logistics, Production Scheduling or Customers Services

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Motivations for ERP

Most common reasons
Capability
Data visibility
End to end view of supply chain processes

Performance
Cost reduction Strategic decision making Customer responsiveness
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Risk Factors
Failure to redesign business processes to fit the software Lack of senior management support Insufficient training to IT workforce & end users Lack of ability to recruit & retain qualified ERP system developers
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Risk Factors
Inability to obtain full time commitment of the Project team members Lack of integration Insufficient internal expertise Lack of a champion Project Leader Lack of Business Analysts Ineffective communications
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Critical Success Factors

Management support
Top management advocacy, provision of adequate resources & commitment to the project

Best people full time

Relevant business experts should be released full time for the project

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Critical Success Factors

Empowered decision makers
Project team members should be empowered to make quick decisions

Deliverable dates
At planning stage set realistic milestones & end dates

Champion
Advocate for ERP system in promoting benefits
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Critical Success Factors

Vanilla ERP
Minimal customization

Smaller scope
Fewer modules, Less Functionality implemented, Smaller user groups, Single / Fewer Site/s

Definition of scope & goals

Clear definition & adherence
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Critical Success Factors

Balanced Team
Right mix of business analysts, technical experts and users from within the company & consultants from external companies

Commitment to change
Perseverance & determination to solve inevitable problems of change

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